Wisdom of Rich Dad

I am still reading Kim Kiyosaki’s Rich Woman and in the true Kiyosaki style she offers some incredible common sense “objection handling” to the common issues thrown up when it comes to why so few women have succeeded in obtaining financial independence either within a relationship or on their own.

1. I don’t have the time.

2. I am not smart enough.

3. I haven’t got the money.

Now as a mother myself, I can fully relate to the time factor involved with bringing up children, however I take on board Kim Kiyosaki’s viewpoint that if my life depended upon finding the time, I’d have found it somehow.

I concur with the viewpoint that men are not born smarter than women when it comes to finances, in fact biologically women are better equipped for investing than men. ( Kim goes on to show this .) I began studying investing over 12 years ago, when on regular trips to the USA & Canada I was amazed at the extent of personal finance books, business and self help books available everywhere compared to the extremely limited selection in the UK. ( So I bought several on every trip & changed my course.)

I have been guilty of waiting to hit the big deal, then start investing, and with money to invest too much too soon without first practising, I have set myself a small challenge this week of finding an asset ( something that pays me a positive cashflow ) this week for around £100. I am a massive believer in learn by doing, I have come through all the money management levels required in order to be free to invest in passive income so I will research what is available and do my due diligence.

If you ever come across the chance to play the Cashflow 101 game by Robert Kiyosaki then jump at the chance, you play the part of a Rat, trying to get out of the Rat Race. You collect your “Monthly Cashflow” payment and decide which small deals provide you with a positive Cashflow, when to convert those samll deals to capital gains to clear liabilities and when to purchase a big deal.

The object of the game ( and is highlighted throughout Kim Kiyosaki’s book ) is Financial Freedom is achieved when your Passive Income pays for your Total Expenses.

Source: http://witoo.wordpress.com/2008/04/05/financial-freedom-is-achieved-through-passive-income/

Mis-selling and poor advice continue to plague the domain of investment and insurance products. To make matters worse, a section of advisors/agents vociferously claims that the aforementioned don’t exist; others choose to justify the same by shifting the onus onto investors. Such trivialities notwithstanding, the ground reality is that mis-selling and poor advice are ‘clear and present’ menaces that investors routinely encounter.

Typically, by the time an investor realises that he has become a victim of mis-selling/poor advice, the damage has already been done. We thought it would be interesting to come up with a checklist of warning signals that can caution an investor of an impending investment/insurance disaster.

Now, we aren’t claiming that this list is an exhaustive one. Perhaps, it wouldn’t be possible to create an exhaustive list, given the numerous instances of poor advice rendered and the innovative mis-selling techniques deployed. But this can serve as a starting point for sure.

So here goes. It’s time for you to be cautious if your advisor

1. Only peddles forms and fails to offer advice

If your advisor is the kind who only approaches you for getting you invested in various avenues and offering advice doesn’t feature in his scheme of things, then there is a cause for concern. An advisor’s primary responsibility is to offer advice.

He is the one who should help you translate your investment objectives into monetary terms, lay out plans to help you achieve the same and get you invested in line with those plans. The advisor is also required to periodically review your plans and incorporate changes therein, if required.

While offering prompt and reliable service is important, offering accurate and unbiased advice is certainly an advisor’s core responsibility. And dealing with an advisor who doesn’t make the grade on the latter, could spell trouble for you.

2. Frequently churns your portfolio

Churning the portfolio is a term that investors in the mutual funds segment should be able to easily identify with. It means frequently buying and selling funds, especially of the equity variety. You can be sure that you are at the receiving end if most of this buying and selling is in NFOs (new fund offers).

Equity investing is essentially about investing for the long-term and if the advisor’s recommendations were correct in the first place, there should be little need for a churn. So an advisor who frequently churns your portfolio is either incompetent or has an ulterior motive i.e. to make more money by getting you regularly invested in NFOs.

For the uninitiated, NFOs fetch higher commissions vis-a-vis investments in existing funds, thereby making them more popular among advisors. While you bear the burden of the churn in the form of entry and exit loads, the advisor makes a quick buck at your expense.

The good news for the investor is that SEBI (Securities and Exchange Board of India) has taken concrete steps to curb mis-selling in NFOs and indications are that we are likely to see fewer equity NFOs going forward.

3. Attempts to entice you by offering rebates/kickbacks

Offering rebates/kickbacks is a practice wherein an advisor ‘compensates’ you for investing through him. For this he offers you a part of his commission earnings. The rebate/kickback offered is linked to the sum of investments.

Incidentally, the practice of offering rebates is explicitly prohibited in both mutual fund and insurance offerings. Without a doubt, if offering rebates is your advisor’s forte, then something is amiss. He is doing so to cover up his incompetence and it is in your interest to steer clear of such advisors.

4. Only emphasises on returns and ignores risk

It is not uncommon to find advisors, whose arguments (to convince clients about the merits of any investment) revolve only around returns with the risk aspect being conveniently ignored. Any advisor worth his salt will vouch for the fact that while evaluating the worthiness of an investment avenue, the risk-return trade-off is of paramount importance i.e. both risk and return need to be accorded equal importance. Furthermore, the suitability of the investment avenue for the investor in question needs to be determined. This in turn entails understanding the investor’s risk profile, needs and investment objectives. Clearly, there is much more to making an accurate recommendation than just evaluating the returns aspect. And any advisor who fails to do so, deserves a thumbs down.

Incidentally, a similar view was recently echoed by SEBI in the context of mutual fund advertisements. The regulator was of the view that the rapid fire manner in which the standard warning is recited in advertisements makes it unintelligible. Apparently, the practice of side stepping risk is not restricted to advisors alone.

5. Offers ULIPs as a staple offering for all your needs

This one’s for insurance advisors. Don’t get us wrong, we have nothing against ULIPs (unit linked insurance plans) or even with advisors selling ULIPs for that matter, so long as proper disclosures are in place i.e. the client is made adequately aware of the costs involved and other implications of buying a ULIP. In other words, the advisor should enable his client to make an informed decision.

However, all is not in order, if the advisor recommends ULIPs as a standard offering for all your insurance needs. It’s a well chronicled fact that term plans are the cheapest form of insurance; a term plan should ideally be the first insurance product that you must add to your insurance portfolio.

More importantly, the latter can play an important role in helping you achieve a cover that is in line with your Human Life Value. Of course, offerings like ULIPs and endowment plans can be added at a later stage.

So why do insurance advisors display a penchant for ULIPs? Maybe it’s the higher commission earnings in ULIPs vis-a-vis term plans that are driving the insurance advisor i.e. mis-selling.

On the other hand, maybe the insurance advisor just doesn’t know better i.e. he lacks proper knowledge. Anyway, being associated with such an advisor is an unenviable proposition for you.

As always, while this article has been written for the benefit of investors, there is no reason for advisors who go about conducting their business in an ethical and righteous manner to feel annoyed. We can only admire them for their resolve in the face of intense competition and tempting commissions.

Tom Chenault invited Robert Kiyosaki (Rich Dad, Poor Dad) on his radio show talking about network marketing.

Robert Kiyosaki talks MLM

from the April 12 Home Based Business Radio Show

• Slow Internet (dial-up): http://www.tomchenault.com/Audio/Kiyosaki/Robert_Kiyosaki_low.wma
• Fast Internet(DSL/Cable): http://www.tomchenault.com/Audio/Kiyosaki/Robert_Kiyosaki_high.mp3

Technically speaking, a credit card is an unsecured loan. This means that unlike a secured loan, which is advanced by a bank/financial institution against a security like property for instance, a credit card is offered without any security. 

Not surprisingly, many of the negatives that get written about credit cards are related to expenses, hidden or otherwise, that the user did not know (or was not informed) at the time of opting for the card. To avoid distress at a later date, we have listed down some points that you must note while using the card: 

1. Term and conditions

How many times have you read this before - read the terms and conditions carefully before signing up for anything. For every product you purchase or service you opt for, always read the terms and conditions and that includes credit cards. If you find anything in the terms and conditions of the credit card that was not conveyed to you or is contrary to what was conveyed to you, then seek a clarification from the bank. If you are not satisfied with the clarification, dump the card.

It’s important that you read up on the terms and conditions before you use the card and not after. Once you use the card, it is assumed that you have read the terms and conditions and have accepted the same.

2. Annual fees

It is common for banks to waive off the annual fees/membership fees in the first year (cards are usually issued for at least two years). The second year fees are usually charged. It is possible that you are promised that the second year’s fees will be waived off as well. The only way to find out is to check with the bank in the second year.

It is possible that the bank may waive off the fees based on your track record of making timely payments. If the bank does not waive off the fees in the second year, you can cancel the card. However, if you wish to cancel the card in the second year ensure you do so before using it, because using the card indicates that you have agreed to pay the fees/charges for the second year’s subscription.

3. Lifetime free cards

Offering ‘lifetime free credit cards’ is a relatively new trend in the credit card industry. While there was a time when most banks charged annual fees on their credit cards, the industry is graduating to a level where annual fees are being phased out. In effect, clients are being given lifetime free cards i.e. no annual fees are charged. However, its best to double-check with the bank what the executive has promised you about all annual fees being waived off.

4. Minimum payment

One detail you will find relatively well highlighted in your monthly account statement is the Minimum Payment Due. This is the minimum amount that you must pay for the purchases done in that month so as to not attract a penalty for default on payment of card dues.

We would recommend that you pay the entire sum to the extent possible. Buying on a credit card is okay till the time you pay your bills religiously. The moment you carry forward your payment to the next monthly cycle, you will have to pay interest on the unpaid amount along with taxes. In the final analysis this turns out to be very expensive.

5. Payment by EMI

On the same lines, whenever you make a large purchase (the amount varies across banks) you may get an offer from the bank to opt for the EMI (equated monthly installment) facility to make the payment. This facility does not come cheap and the interest on the EMI is prohibitive. Again to the extent possible, we recommend that you make the payment before the due date in one go and give the EMI facility a miss.

6. Borrowing cash is expensive

Credit cards can be used for making purchases on credit as also for borrowing cash. While making purchases on your credit card (so long as you pay on time) is okay, borrowing cash on your credit card is a very expensive affair. Avoid borrowing cash on your card; use the card to the extent possible for making purchases.

7. Insurance benefit

Many credit cards are known to offer an insurance cover. We recommend that you ignore this benefit and go for the core offering - credit card. If the card has features that suit you, then you can opt for it even if there is no insurance cover. On the other hand, if the card features are not to your liking then reject it regardless of the insurance cover.

In any case, on most occasions the insurance cover is usually linked with so many terms and conditions that it is very difficult to claim the same. It is altogether another thing that the insurance cover is unlikely to be sufficient for you.

~ Jerome Ratliff~

Having a mentor a part of your business or you, can accelerate your profession into overdrive. When working with a mentor, you create a professional relationship which allows you to become a better professional. But finding your mentor, regardless who it is, is not an easy task.

Where should you start looking for your mentor?

Put together a plan of how you intend to find your ideal mentor. Decide at that moment that you will not quit before you find him/her.

What’s your objective? What do you need a mentor for? Why do you need a mentor now?
These are questions you must ask yourself prior to meeting with a mentor.

In addition, make sure to have your string of interview questions ready for the mentor. This will be how you determine who is right for you.

Start by asking around. See what other successful professionals are doing and ask questions.

What do you got to lose?

Be up front in the interview by letting them know what you would like to accomplish by having a mentor. This will help determine if the mentor is right for you. If you’re impressed with them, ask for a referral to speak with the mentor.

Look for organizations that offer mentoring programs. It may cost you, but at the same time it will be well worth your money. That’s assuming that you chose the right mentor too.

Two years ago when I began with Robert Kiyosaki’s mentoring program, I failed to ask a lot of the upfront questions that I’ve outline here before you. Luckily for me, since Robert Kiyosaki’s program is so structured, it didn’t matter. However, it could have helped me by showing that I was proactive.

You may come up with your own questions, just be sure that you are thorough and show that you are determined to succeed. A good mentor will hold you accountable for what you need to be doing as a professional. This is important because you are the one in charge, not the mentor. The mentor is there to help you kick it into gear.

Being a part of Robert Kiyosaki’s mentoring program has changed my life immensely, that I decided to mentor others.

So, if you’re serious about choosing a mentor, then start today and start now. You won’t regret it.

Robert Kiyosaki came out with a new book caled How to Increase Your Financial IQ.

He went on WNBC recently to give some practical money-saving tips in support of his new book’s launch.

<– Click on the image on the right to launch the video.